Ed Appears on i24
Ed Butowsky, top wealth manager in Dallas and managing partner of Chapwood Investments, LLC, discusses the China trade fears and their impact on the stock market.
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Transcript of the show:
Michelle: 00:00 All right to discuss today’s business headlines are Alan Toulson and economist and founder of the blog reality check and ed be top ski managing partner at a chap would investments. Gentlemen, thanks for being with us. Alan. Let’s start with you. President Trump threatening more tariffs. As we said, the president, a threatening to increase the tariffs to 25% on about $200 billion worth of Chinese goods. Is the president, right to put the squeeze on China. Now
Alan: 00:30 I’d have to agree with a Senate majority leader Chuck Schumer, who is ordinarily no friend of Mr Trump’s who said that the only way to deal with the Chinese is by using strength. The Chinese have a decades long record of violating practically every treaty that they’ve signed for from all reports and certainly what the administration claims the Chinese. We’re starting already to backtrack on trade commitments that they’d been making over the last few months, which we’re expected to bring these talks to a mutually beneficial, um, conclusion possibly as early as the end of this week. But apparently again, there was major Chinese backtrack in the United States, quite rightly decided to put his foot down and now it’s up to the Chinese to decide how they want to handle Donald Trump.
Michelle: 01:23 Ed, how can any deal with the Chinese be enforced? I mean this really brings in the need to have enforcement mechanisms in, in the form of tariffs being maintained until there is a change of behavior from Beijing.
Ed: 01:37 And that probably will never occur in our lifetime. Michelle, I mean, you know, for so many years it’s impossible to trust the Chinese on just about anything. You know what’s Nice about this is we know that probably the top level of the terrorists is 25% so you probably have a little bit of a range now because the president through out what he would go to, I really believe this is the president is just getting a little sick and tired of how long this trade negotiation has taken and it really has kind of hit a kind of a rigor mortis stage. Things aren’t moving at all. So this was his way to really get things going. But can you trust the Chinese and something that they sign? No, I don’t think there’s any chance in the world we can take anything they sign and really believe it’s going to be enforced, but we’re moving somewhere. I said a long time ago on this show, Michelle, that you can’t necessarily believe that something great is going to happen. Uh, but something is going to start going in the right direction and that’s really all we can hope for that’s going to come from this trade negotiation
Speaker 1: 02:36 and arguably at any kind of trade to deal that the u s strengths with China is better than the position that it was before these negotiations started. Alan, it brings in this question of whether this will be a narrow deal focusing mostly on trade issues or whether this will be a broader deal that actually tackles those tougher issues addressing China’s intellectual property practices. It’s forced data transfers and some would say, Alan, that this is it. This is the chance to get a deal that tackles all of this. Whilst the U s economy is strong, all the Chinese economy is struggling a little bit. Is this the it is this now on every time?
Alan: 03:17 Oh No, it’s not now. We’re never time simply because just as the United States has always needed Shyna, much less than shiner has needed. The United States. That’s going to continue for as far as the eye can see, but the problem is, as Ed just pointed out, the Chinese are completely untrustworthy and this is a big ask or I should say a big demand from the United States to restructure their entire economy, which is basically at least as far as world trade rules go, a totally rogue economy. This is a massive restructuring job. It’s not going to happen, and even if the Chinese had a so called come to Jesus moments right now and said, you know, Gosh darn it, we’re going to do exactly what what president Trump says. There was no way that the United States could adequately verify that promise for a years to come, which is why I fully expect very high tariffs to stay exactly where they are. And for that to actually continue what’s been a process of steady us disengagement economically from China, that’s going to keep continuing no matter what the outcome of these current trade talks.
Michelle: 04:28 But Alan, do you see I favorable outcome from these current trade talks in one way or another? Do you see perhaps that narrower trade deal?
Alan: 04:38 It’s possible, but I think the president’s actions yesterday strongly indicated that he’s not going to be satisfied with that kind of an outcome. Uh, it’s been widely speculated that that getting the Chinese to agree to buy more soy beans and more natural gas, for example, would help him in those form heavy states in the Midwest that were quite, that were quite crucial to his election victory back in 2016 and there’s a certain political logic to that. But if you listen carefully to what American farmers have been saying, clearly they’re very unhappy with the China trade situation over the last few months. But there’s so far still willing to give him the benefit of the doubt.
Michelle: 05:23 And it’s interesting, Alan, as you pointed out, that there’s even some support from the Democrats, at least stuff from a senator Chuck Schumer tweeting today that a alternative that, that the president should, should keep that up saying don’t back down a strength is the only way to win with a China. Add final thoughts on this. The markets to a large degree, many would say have already baked in a positive trade to deal. What happens if we don’t get some kind of positive resolution over the next few weeks?
Ed: 05:56 Okay,
Ed: 05:56 well tell you, regardless of we do or if we don’t, but if, uh, you know, this market has every reason to go substantially lower from here because it’s so grossly overpriced and yeah, that’s, that’s a, it’s an interesting subject for us to dissect, but to address exactly that point. If a deal is not done with China, we will see this market sell off and then probably pick up steam because on a technical basis you’re going to start hitting a lot of resistance points or a lot of support levels and this market will start to fall, you know, off quite a bit. You know, I think we’re overstating also a little bit how important this deal is. Michelle, I just want to make that one point. It’s important, but there’s a lot of other trade imbalances and other countries as well. But as China, if we strike a deal with China, we might strike deals with other countries, but overall, be very, you know, a careful in the stock market regardless of we strike a deal or not add. Thank you so much. I’d be tough skate Alan Tunnels and appreciate it.